Correlation Between EchoStar and Ituran Location

Can any of the company-specific risk be diversified away by investing in both EchoStar and Ituran Location at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EchoStar and Ituran Location into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EchoStar and Ituran Location and, you can compare the effects of market volatilities on EchoStar and Ituran Location and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EchoStar with a short position of Ituran Location. Check out your portfolio center. Please also check ongoing floating volatility patterns of EchoStar and Ituran Location.

Diversification Opportunities for EchoStar and Ituran Location

-0.2

Correlation Coefficient

EchoStar  Ituran Location

Good diversification

The 3 months correlation between EchoStar and Ituran is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and Ituran Location and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ituran Location and EchoStar is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EchoStar are associated (or correlated) with Ituran Location. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ituran Location has no effect on the direction of EchoStar i.e., EchoStar and Ituran Location go up and down completely randomly.

Pair Corralation between EchoStar and Ituran Location

Given the investment horizon of 90 days EchoStar is expected to generate 2.22 times more return on investment than Ituran Location. However, EchoStar is 2.22 times more volatile than Ituran Location and. It trades about 0.18 of its potential returns per unit of risk. Ituran Location and is currently generating about -0.03 per unit of risk. If you would invest  1,270  in EchoStar on March 16, 2024 and sell it today you would earn a total of  552.00  from holding EchoStar or generate 43.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EchoStar  vs.  Ituran Location and

EchoStar

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ituran Location

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ituran Location and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ituran Location is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EchoStar and Ituran Location

The main advantage of trading using opposite EchoStar and Ituran Location positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EchoStar position performs unexpectedly, Ituran Location can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ituran Location will offset losses from the drop in Ituran Location's long position.

The idea behind EchoStar and Ituran Location and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.